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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31,1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-11897
BW/IP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 33-0270574
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 OCEANGATE BOULEVARD
SUITE 900
LONG BEACH, CALIFORNIA 90802
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(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (562) 435-3700
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INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
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INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
COMMON STOCK, $.01 PAR VALUE, 24,275,000
OUTSTANDING AT MARCH 31, 1997 (SHARES)
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BW/IP, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1997 (unaudited) and December 31, 1996 2-3
Condensed Consolidated Statements of Income -
Three months ended March 31, 1997 and
March 31, 1996 (unaudited) 4
Condensed Consolidated Statements of Cash Flows Three months
ended March 31, 1997 and
March 31, 1996 (unaudited) 5
Notes to Condensed Consolidated Financial Statements
(unaudited) 6-7
Item 2. Management's Discussion and Analysis 8-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
BW/IP, INC.
Condensed Consolidated Balance Sheets
(Dollar amounts in thousands)
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<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
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(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 11,456 $ 9,458
Accounts and notes receivable (less allowance
for doubtful accounts of $3,510 at March 31,
1997 and $3,279 at December 31, 1996) 112,709 110,564
Inventories 85,382 81,353
Other current assets 16,663 15,241
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Total current assets 226,210 216,616
Property, plant and equipment, at cost (net of accumulated depreciation and
amortization of $86,050 at March 31, 1997 and $85,542 at
December 31, 1996) 112,675 111,827
Goodwill (net of accumulated amortization
of $8,846 at March 31, 1997 and $8,305
at December 31, 1996) 52,865 55,522
Other assets 19,703 20,321
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Total assets $411,453 $404,286
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
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BW/IP, INC.
Condensed Consolidated Balance Sheets
(Dollar amounts in thousands)
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<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
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(Unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 8,955 $ 9,087
Accounts payable 34,999 36,755
Other current liabilities 49,455 44,823
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Total current liabilities 93,409 90,665
Long-term debt 89,696 80,723
Other long-term liabilities 44,782 44,053
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Total liabilities 227,887 215,441
Stockholders' equity:
Preferred stock -- --
Common stock 245 245
Paid-in capital 85,763 85,763
Retained earnings 112,256 109,173
Cumulative translation adjustment (14,085) (5,723)
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184,179 189,458
Less common stock in treasury, at cost (613) (613)
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Total stockholders' equity 183,566 188,845
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Total liabilities and stockholders' equity $ 411,453 $ 404,286
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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BW/IP, INC.
Condensed Consolidated Statements of Income
(Dollar amounts in thousands, except per share data)
(Unaudited)
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<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1997 1996
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<S> <C> <C>
Net sales $ 114,715 $ 121,938
Cost of sales 70,612 75,160
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Gross profit 44,103 46,778
Selling, administrative and operating expenses 33,485 34,840
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Operating income 10,618 11,938
Interest expense, net 1,618 1,714
Other expenses 149 274
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Income before income taxes 8,851 9,950
Provision for income taxes 3,098 3,880
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Net income $ 5,753 $ 6,070
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Net income per share $ .24 $ .25
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Dividends declared per share $ .11 $ .11
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Weighted average number of shares outstanding 24,275,000 24,275,000
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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BW/IP, INC.
Condensed Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
(Unaudited)
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<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1997 1996
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<S> <C> <C>
Cash flows provided by (used in) operating activities $ 1,275 $ (3,384)
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Cash flows used in investing activities:
Capital expenditures (4,830) (3,251)
Other -- (249)
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Net cash used in investing activities (4,830) (3,500)
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Cash flows from financing activities:
Net borrowings under credit agreements and senior notes 9,000 10,326
Dividends paid (2,670) (2,670)
Other (160) --
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Net cash provided by financing activities 6,170 7,656
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Effect of exchange rate changes on cash (617) 754
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Net increase in cash and cash equivalents 1,998 1,526
Cash and cash equivalents at beginning of period 9,458 9,162
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Cash and cash equivalents at end of period $ 11,456 $ 10,688
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
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BW/IP, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying condensed consolidated balance sheet as of March 31,
1997, and the related condensed consolidated statements of income and
cash flows for the three months ended March 31, 1997, and 1996 are
unaudited. In management's opinion, all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of such
financial statements have been made.
The accompanying condensed consolidated financial statements and notes
in this Form 10-Q are presented as permitted by Regulation S-X, and do
not contain certain information included in the Company's annual
financial statements and notes. Accordingly, the accompanying condensed
consolidated financial information should be read in conjunction with
the Company's 1996 Annual Report to Stockholders. Interim results are
not necessarily indicative of results to be expected for a full year
and are subject to audit and adjustment at the end of the year.
BW/IP, Inc. is the parent company of BW/IP International, Inc. (BW/IP).
Unless the context otherwise requires, references herein to "the
Company" are to BW/IP, Inc. and BW/IP International, Inc. and its
consolidated subsidiaries.
2. Inventories
Inventories, net consist of the following (amounts in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
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<S> <C> <C>
Finished parts $ 41,700 $ 52,623
Work in process 44,544 26,465
Raw materials and supplies 14,617 26,465
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Less progress billings (15,479) (7,207)
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Net inventories $ 85,382 $ 81,353
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</TABLE>
3. Subsequent Events
On May 6, 1997, the Company entered into an Agreement and Plan of
Merger (the "Merger") whereby it would merge in a stock for stock
merger of equals with Durco International Inc. ("Durco"). The Merger
will be accounted for as a pooling of interests transaction.
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3. Subsequent Events, continued
The Merger agreement calls for current Durco shareholders to retain
their present shares, and for BW/IP shareholders to receive 0.6968
shares of Durco common stock.
Completion of the Merger is subject to approval by the shareholders of
both Durco and BW/IP at meetings that are expected to be held over the
summer, and the expiration of all applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvement Act of 1976.
Durco and BW/IP have agreed to pay each other termination fees and to
reimburse certain expenses in the event the Merger is not consummated
because of a competing transaction. The companies have also granted
each other options for 19.9% of each other's common stock exercisable
under certain circumstances.
On April 30, 1997, the Company purchased 47% of the minority interest
in its joint venture in Argentina, Byron Jackson Argentina I.C.S.A.
bringing its ownership to 98%. The acquisition will be accounted for by
the purchase method of accounting and the impact is not expected to be
significant to the consolidated financial position or results of
operations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Net income was $5.8 million for the three months ended March 31, 1997 compared
with $6.1 million for the corresponding period in 1996. The related net income
per share was $.24 for the first quarter of 1997 compared to $.25 for the first
quarter of 1996.
The Company's consolidated financial results for the first quarter of 1997 and
1996 is summarized below:
<TABLE>
<CAPTION>
(Dollar amounts in millions, except per share data) Three Months Ended
March 31,
1997 1996
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<S> <C> <C>
Net sales $114.7 $121.9
Gross profit 44.1 46.8
Selling, administrative, and operating expenses 33.5 34.8
Operating income 10.6 11.9
Net income 5.8 6.1
Net income per share $ 0.24 $ 0.25
Bookings $144.5 $138.9
Backlog $204.4 $161.6
</TABLE>
Bookings, an indicator of future sales, of $144.5 for the first quarter of 1997
were an all-time high exceeding the previous record of $138.9 for the
first quarter of 1997. The bookings were supported by approximately $10.4
million from recently acquired entities. The strengthening US dollar negatively
impacted bookings by approximately $6.0 million.
Backlog at March 31, 1997 of $204.4 million was 26.5% higher than the $161.6
million at March 31, 1996. Increased backlog in 1997 is due to the acquisitions
and overall strong original equipment bookings.
Net sales of $114.7 million for the three months ended March 31, 1997 were $7.2
million or 5.9% lower than the corresponding period in 1996. Sales in Europe
were approximately $9.4 million lower in the first quarter of 1997 versus the
first quarter of 1996 despite approximately $4.0 million of additional sales
from the recently acquired entity in Hengelo, Holland. The reduction was
partially due to the strengthened US dollar which negatively impacted total
Company sales by approximately $5.0 million and the timing of shipments.
Gross profit as a percentage of sales was 38.4% for the quarters ended March
31, 1997 and 1996. Selling, administrative, and operating expenses increased to
29.2% for the three months ended March 31, 1997 versus 28.6% for the
correspondingly period of 1996. The increase was principally due to lower sales
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volume, reflects the fixed nature of a significant portion of selling,
administrative, and operating expenses and the effects of higher aftermarket
sales in the mix.
The Company's 1997 first quarter effective income tax rate decreased to 35% from
39% in the first quarter of 1996. The decrease resulted from a combination
of factors, including geographical shifts in earnings composition and
implementation of various tax saving strategies.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1997, the Company generated
approximately $1.3 million of net funds from operating activities, as compared
to the corresponding period in 1996 during which the Company used approximately
$3.4 million of net funds in operating activities.
At March 31, 1997, the Company had outstanding under its credit facilities
borrowings totaling $23.5 million and letters of credit totaling $15.0 million
and had $82.1 million available for borrowing thereunder. As of March 31, 1997,
the Company had outstanding $24.2 million of obligations relating to performance
bonds.
The interest rate on the Company's outstanding senior notes is between
7.14% and 7.92% per annum. The Company's borrowings under its other credit
facilities are currently at floating interest rates. Interest costs are
therefore subject to change depending upon the movement of short-term interest
rates.
OTHER
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share". SFAS No.
128, which supersedes APB No. 15, sets forth rules for computing, presenting and
disclosing basic earnings per share (which replaces primary earnings per share)
and diluted earnings per share. SFAS No. 128 is effective for the Company in the
fourth quarter of 1997. The Company does not expect the adoption of SFAS No. 128
to have any significant impact on its earnings per share calculations.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit No. 27. Financial Data Schedule
(b) There were no reports on Form 8-K filed during the quarter ended March
31, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BW/IP, INC.
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(Registrant)
Date: May 14, 1997 By: /s/ R.J. HORNBAKER
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R.J. Hornbaker
Vice President of Finance
and Chief Financial Officer
(Duly Authorized Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 11,458
<SECURITIES> 0
<RECEIVABLES> 112,709
<ALLOWANCES> (3,510)
<INVENTORY> 85,382
<CURRENT-ASSETS> 226,210
<PP&E> 198,725
<DEPRECIATION> 86,050
<TOTAL-ASSETS> 411,453
<CURRENT-LIABILITIES> 93,409
<BONDS> 89,696
0
0
<COMMON> 245
<OTHER-SE> 183,321
<TOTAL-LIABILITY-AND-EQUITY> 411,453
<SALES> 114,715
<TOTAL-REVENUES> 114,715
<CGS> 70,612
<TOTAL-COSTS> 70,612
<OTHER-EXPENSES> 33,233
<LOSS-PROVISION> 401
<INTEREST-EXPENSE> 1,618
<INCOME-PRETAX> 8,851
<INCOME-TAX> 3,098
<INCOME-CONTINUING> 5,753
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,753
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
